Legal Aspects of Business

This article discusses the legal aspects of business, focusing on the duties and responsibilities of agents and principals. It emphasizes the importance of following legal frameworks and regulations in business relationships to achieve desired results.

Legal Aspects of
Business

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................2
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Legal aspects of business are those kind of aspects which are very important for an business. It
allows all types of legal activities which are related to business in a systematic way. These are
those effective aspects which effects decision taking because of which a organisation is able to
achieve its goals and objectives. Laws of this kind are formed by the House of Parliament that
are required to be followed by every organisation or business entity. Rules and regulation of this
type helps in achieving efficient results. This helps in preventing those kinds of decisions which
are going to create negative effect over an organisation. In terms of agency law these are most
important laws in which there is existence of fiduciary kind of relationship. These relationships
happen between two parties. Such laws are based upon principal and agent relationship. In this
kind of relationship a principal is there who hires another person known as agent to perform a
duty, which is given to him by principal. Responsibility of principal is that he should maintain
communication with his agents upon any action taken by him. Through this assurance of smooth
working is done by principal. Relationship of such kind is developed only when principal
appoints someone to act on his behalf. An agreement is to be formed this can be both oral and
written form. In this agreement legal base is provided through agency law and contract law
which are necessary to make an valid agreement in the eyes of law.
Laws regarding agency is completely based over a tripartite relation because in this relationship
can be identified between employer and employee. Due to these kinds of relationship
organisational activities can be formed in much easy manner. In an tripartite relation various
relationship are explained in which role of agent is of service provider and are working under an
agreement formed by agent and principal. In the file there is going to be discussion of laws and
regulations. Also importance of principal- agent relationship is going to be discussed. “ An
agent has to perform various duties which are imposed through general law and are legal
incidences of relationship of agent. An agency is contractual because of this only some
duties come into effect after signing of contract. Some duties are applicable upon the agent
as soon as he signs a contract”. This is going to be discussed further in detail.
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MAIN BODY
Agency laws are one of the most important forms of rules and regulations. In which
duties and responsibility is to be followed by both principal and agent. These duties assigned to
them are to be followed under obligations mentioned in contract signed by them. Agreement of
such kind is formed for a specific time period (Kemp, 2018).Any kind of situation all terms and
conditions are too followed. As in this way only a principal can be marked safe from any kind of
liability. It is required to understand that if there is failure on part of principal in performing any
of the activity. Principal is going to be liable for any liability occurred because of such situation.
Various duties are there which are mentioned for a agent and if the activities are performed
according to legal framework prescribed under agreement. Duties of this kind are required to be
followed for purpose of fulfilling regulations and standards prescribed under agency law.
First duty or obligation that is required by agent to follow at the time of performing his duty
which has been given to him by principal is ‘follow instruction and perform them in lawful
manner’. An agent who is doing his or her duty for the principal, it should be ensured by them
duty is performed as per guidelines given by the principal to them. Requirement should be full
fill by agent, as instructed because they are not followed properly by an agent. All of its
consequences are bearded by principal. Various cases are there which is related to agent and
principal. Relevant case law for this duty is Rayan v Doulbay. An Agent has been given
responsibility of storing a product in a go down but task assigned by him was not perform in an
appropriate manner. He stored the product in another store’s go down and handled it with
careless attitude (Lindström. and Hanken, 2018)So, due to this judgment passed in this case by
court was in favour of principal and agent was held liable for the damages that have to be
managed by Rayan. In other words this can be understood as; it is the duty of agent to follow his
duty with responsible attitude not with careless attitude. Such duties are to be performed with
appropriate information from principal. Also it is agent’s responsibility to check any other
information, if missed on his part. Agent should have proper knowledge regarding agency law.
So that duty can be performed by him as per framework given in the law of agency. This lead
towards achieving better results.
Second duty that is to be followed by agent is “Duty of care and skill”. Situation has to be
understood by agent before performing task. This is necessary because chances of gaining
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positive results improve. In a simple manner this is understood as, performing a task while
maintaining skills and care for it leads towards positive results. If because of any reason agent is
not able to perform his duties then principal should be held liable for this. If proper skills and
care is not used for performing a particular task then principal can held agent liable towards such
an act. In situation of insolvency of principal this duty is not applicable upon agent (Lindström.
and Hanken, 2018)One of the most important cases regarding this duty is Shrdon v.White. Facts
of the case are agent was given a responsibility of delivering all information to principal but
agent is not done as told by principal. Due to this principal has to suffer loss. After analysing the
facts of case, judges have given decision that default has been performed by agent. As he did not
performed task in efficient manner (Vanderpool, 2018). These duties are to be followed under
any kind of circumstances by the agent. In a simple sense it means agent cannot violate these
duties.
Duties are not limited only to circumstances that are mentioned above. They are also
required in order to manage any kind of conflict takes place between principal and agent. Next
duty explained of agent is “duty to avoid any kind of conflict between agent and principal”.
In this type of condition certain circumstances arises because of certain circumstances. In this a
agent from the motive of earning hidden profit misuses powers that has been given to him by
principal. (Maresova. and Klimova, 2016)For instance: an agent sells the property and
responsibility of selling it is given by principal to him. He earns secret profit from it, which
becomes reason for conflict among them. If an agent is earning secret profit then his
responsibility is that he should disclose it to principal.
Relevant case related to this situation is R v Balikon; in this case it was found by the
court that one property has been purchased. According to the instruction given by Balikon, it is
required by agent to give information about the purchase done to him. Agent did so but did not
disclosed secret profit which he earned out of it. This later on resulted in to conflict of interest on
part of agent. He was held liable for it. So it is observed from the situation of case mentioned
above that conflict of interest result into negative impact over relationship of agent and principal,
if not disclosed.
An agent should understand whenever he is going to perform any duty as guided by
principal, its results and outcome is going to change automatically. It is the responsibility of
principal and agent to discuss all necessary points regarding the agreement. This is going to let
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smooth functioning of activities. Also results in rising of standards set up by principal for his
company or organisation. So, it is very important to follow duty mentioned above by the agent of
the company and should not earn secret profit or commission without its discloser to principal
Other duty of agent which is required to be followed by him towards principal is “Duty of
account”. This type of duty is very important to be followed by an agent. In this they are
required to keep assurance about any of the circumstance; in which principal is willing to have
an view over accounts maintained by agent and then it becomes duty of agent to show it to
principal. No personal profit should be mentioned with that of organisation as this may lead
towards confusion among agent and principal. This confusion gives rise to problems. The duty is
not limited up to here, but it is also necessary that the duty which has been delegated to them
must return to principal even after the cease of relation (Maroušek. And et. al., 2016).Under
various occasions number of roles and responsibility is delegated to agent. Due to this,
delegation of duties directly or indirectly increases the amount of burden upon a agent. Seeing
this additional duty has been given to agent that is”duty not to delegate work”. In this general
rules and regulations it is explained that an agent is not authorised to delegate work which has
been given to him or her under any of the circumstance to a sub agent. If they perform same
action, then legal action can be taken against agent. If an sub agent has to be hired by agent then
he must take consent from principal and consent given should be legal in eyes of law. For
example an agent hires a sub agent to perform his duties upon his behalf and while performing
its duty problem is created by an agent. All loss is going to be bear by agent because prior
permission is not taken. Relevant case related to this duty is“ Johnathan McCain v Powai”. In
this case it was decided by court that no agent is allowed to hire any employee or a sub agent to
work upon their behalf without gaining any legal permission from principal to hire an agent.
Also, in another case that is between “Boss v Tim, which is related with distribution of authority
to an agent. In this agent was hired to perform task on behalf of agent (Khamzin, and et. al. ,
2016)It was observed in the case that important decision regarding selling of property has been
taken by the partner of agent. So, upon analysing situation and all the facts of case, it is decided
by court any loss happened to principal has to be paid by agent. Decision was taken without
permission of principal.
Last and most important duty which is required to be followed by agent is related to “ Duty not
to accept bribe”. Any of agents is required to work as per requirement of principal. Also
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agent should not forget that no decision should be taken which creates problems for an
agent. In a simple way this can be understood as an decision which has been taken in order
to earn profit that has not been disclosed in front of principal by agent. In such case
principal can take action legal action against agent. Situations of these types results in to
breach of agency law and agreement formed under it. For example: Principle has given the
property to agent to use it for his own purpose but agent misused it and planned to earn rent
from it. In such situation principal is allowed to file case against agent for not disclosing
any information regarding use of property. But, if agent takes prior permission and principal
gives his consent in positive manner in that circumstances. Then agent cannot be personally
be held liable for it. Regarding this an relevant case is as follows Boston Deep Sea Fishing
and Ice company v Ansell, (1888), in this case the director has been performing its duty of
directors in two different organisations. This was creating direct or indirect impact upon
business organisation because reduction in profit is there at significant level. Having an over
view of case the judges in this landmark case decided that it is the duty of agent to inform
both the principal about profit he has earned. So, looking at the case, it is held by court that
loss faced by principal has to be paid by agent only( Weber. and Studer, 2016). These are
certain duties and responsibilities which are to be followed. Also, should be considered by
agent at the time of taking of the decision. If in any of the circumstance, they fail to follow
these rules then legal actions can be taken upon them.
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CONCLUSION
From the above file, it is understood that legal aspect of business is one of the most
important topic which explains that any of the business requires agent and principal for smooth
functioning of an organisation. It is the most essential aspects of business as it helps in attaining
goals and objectives. Relations created among principal and agent, should be able to make
understand that agent has liability to perform a task that has been assigned by principal to him. It
is responsibility of principal to make sure that agent is guided properly about performing task in
any situation. Agent is responsible for performing all work in a systematic manner and if he
does not do so then he can be held liable by the principal for it. In simple way, agent helps in
reducing of workload form principal, which allows them to focus over other work because of
which desired results can be achieved in better manner.
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REFERENCES
Books & Journals
Weber, R. H. and Studer, E., 2016. Cybersecurity in the Internet of Things: Legal
aspects. Computer Law & Security Review . 32(5). pp.715-728.
Frolova, E. E. and et. al., 2018. Information security of Russia in the digital economy: the
economic and legal aspects. Journal of advanced research in law and economics, 9(1 (31)).
pp.89-95.
Kemp, R., 2018. Legal aspects of cloud security. Computer Law & Security Review.34(4).
pp.928-932.
Lindström, J. and Hanken, C., 2018. Wearable Computing: Security Challenges, BYOD,
Privacy, and Legal Aspects. In Wearable Technologies: Concepts, Methodologies, Tools,
and Applications (pp. 1043-1067). IGI Global.
Vanderpool, D., 2018. Legal aspects of teleanalysis in the United States. In Psychoanalysis
Online 2 (pp. 93-104). Routledge.
Maresova, P. and Klimova, B., 2016. Economic and technological aspects of business
intelligence in European business sector. In Advanced Multimedia and Ubiquitous
Engineering (pp. 79-84). Springer, Singapore.
Maroušek, J. And et. al., 2016. Polemics on ethical aspects in the compost business. Science and
engineering ethic ., 22(2). pp.581-590.
Khamzin, A.S., and et. al. , 2016. International Legal Aspects of Exercising Refugees Rights in
Central Asia. Journal of Advanced Research in Law and Economics 7(4). pp.835-841.
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